India will need to create around 10 million jobs annually to sustain a 6.5% GVA growth between FY25 and FY30, up from an average of 8.5 million from FY00 to FY23, according to a Goldman Sachs report.
To achieve this, the investment bank highlighted three key policy directions including incentivising the development of affordable housing could sustain job creation in real estate, which accounts for over 80% of the labour force in construction.
It said expanding IT and global capability centre (GCC) hubs into Tier-2 and Tier-3 cities could not only alleviate resource pressure in major cities but also open new employment avenues in smaller urban areas.
Redirecting fiscal incentives to labour-intensive sectors, such as textiles and food processing, would generate more jobs for India’s large workforce, it said.
According to data from the Reserve Bank of India (RBI), the country added around 196 million jobs in the last 23 years, with two-thirds created in the past decade. Until FY19, job creation was mainly propelled by a migration of workers from the agriculture sector to construction and services, a phenomenon aligning with the Lewis Model of labour migration. However, since FY20, agriculture has also seen job additions, driven by pandemic-related rural migration and bolstered by increased subsidies.
Sectoral growth
Though accounting for only 10.6% of total employment, manufacturing’s capital-intensive sub-sectors have shown strong job growth, notably chemicals and machinery, while the government’s Production Linked Incentive (PLI) schemes have helped increase manufacturing jobs post-pandemic.
Representing 13% of employment, construction’s role in job creation has been propelled by capital investment in real estate and infrastructure, underscoring the sector’s dual benefits of job creation and wage growth.
Comprising around 34% of total employment, the sector’s job growth has been driven by retail trade—fuelled by e-commerce growth—and business services, with IT leading job creation in the last decade. Increased digitalization has reshaped roles in retail, from logistics to inventory management.
The services and construction sectors remain significant contributors, with the latter boosted by a strong real estate cycle and government-backed infrastructure initiatives. In services, employment has been led by retail trade and business services, particularly in IT and global capability centres (GCCs). Meanwhile, capital-intensive manufacturing sectors have outpaced labour-intensive ones in job creation, aided by fiscal incentives, although labour-intensive industries still dominate total employment.
India’s demographic transition is unfolding more gradually compared to other Asian economies, with the dependency ratio expected to remain low for the next two decades as more of the population enters working age. Goldman Sachs notes that India’s favourable demographic profile provides a window to capitalize on these dynamics, pushing per-capita income growth and economic productivity higher, it said.
